Editor's Note:

We are cleaning up the watch list tonight by removing a few candidates that are unlikely to get triggered any time soon. We're replacing them with four new candidates.

- James



New Watch List Entries

LDK - LDK Solar

LLY - Eli Lilly

TEVA - Teva Pharmaceuticals

VZ - Verizon Communications


Active Watch List Candidates

DVN - Devon Energy

FDO - Family Dollar Stores

MCD - McDonald's Corp

MMM - 3M Co.

MSI - Motorola Solutions

ONNN - ON Semiconductor

PEP - Pepsico Inc

SHW - Sherwin-Williams

XOM - Exxon Mobil


Dropped Watch List Entries

APC, NVDA, TJX, and WMT were all removed from the watch list.



New Watch List Candidates:


LDK Solar Co. Ltd. - LDK - close: 4.45

Company Info

Solar energy stocks have had a really rough year in 2011. It looks like shares of LDK, a Chinese solar stock, could have found a bottom. The lows in October and November look like a big double bottom pattern.

More aggressive traders may want to open bullish positions now. I am proposing two different entry points depending on how the market performs. The $5.00 level was significant support back in 2009 and 2010. This could prove to be significant resistance. We'll list a breakout trigger over $5.00 if LDK can rally higher. On the other hand LDK already looks overbought given the big bounce from its November lows. With the market looking weak LDK might correct so we'll list a buy-the-dip entry point too.

Buy-the-Dip trigger: $3.85, stop loss @ 3.25

BUY the shares of LDK stock @ $3.85
- or -
buy the 2013 Jan $5.00 call (LDK1319A5)

Breakout trigger: Wait for close over $5.05, then buy the next day, stop loss @ 3.95

BUY the shares of LDK stock @ (see above)
- or -
buy the 2013 Jan $5.00 call (LDK1319A5)

Chart of LDK:

Originally listed on the Watch List: 12/17/11


Eli Lilly - LLY - close: 40.53

Company Info

Investors have been buying high-dividend safe haven stocks. LLY certainly fits the bill with a 4.8% yield. The stock has broken out past major resistance to hit multi-year highs this past week. Investors could probably launch positions now. I want to try and get a better entry point by waiting for a small pull back.

We're suggesting a buy-the-dip entry point at $39.50 with a stop loss at $37.40. Our long-term targets are $44.75 and $48.00.

Buy-the-Dip trigger: $39.50

BUY the 2013 Jan $45 call (LLY1319A45)

- or -

BUY the 2014 Jan $45 call (LLY1418A45)

Chart of LLY:

Originally listed on the Watch List: 12/17/11


Teva Pharmaceuticals Industries - TEVA - close: 42.72

Company Info

It looks like TEVA may be forming a significant bottom in the $35-42 zone. However, there is significant resistance near $45.00. I am suggesting investors wait for TEVA to close over $45.25 and then buy calls the next day. If you prefer more aggressive traders could try and buy dips (or bounces) near the $40.00 level instead. FYI: The Point & Figure chart has recently turned bullish and is forecasting a $57 target.

NOTE: It could be a couple of weeks before TEVA hits our entry point.

Breakout trigger: Wait for TEVA to close over $45.25 and then buy calls the next day, stop loss @ 41.75

BUY the 2013 Jan $50 call (TEVA1319A50)

(FYI: 2014 calls are available)

Chart of TEVA:

Originally listed on the Watch List: 12/17/11


Verizon Communications - VZ - close: 38.78

Company Info

VZ is a slow-moving stock but the trend has turned bullish. This telecom giant has risen toward resistance near $39.00 and its 2011 highs. I am suggesting investors wait for VZ to close over $39.25 and then open bullish positions the next morning. If triggered our long-term target is $45.00.

Breakout trigger: Wait for VZ to close over $39.25, use a stop loss @ 36.75

BUY the 2013 Jan $40 call (VZ1319A40)

- or -

BUY the 2014 Jan $40 call (LLY1418A40)

Chart of VZ:

Originally listed on the Watch List: 12/17/11

Active Watch List Candidates:



Anadarko Petroleum - APC - close: 72.94

Comments:
12/17 update: It was another rocky week for APC. A decline in oil prices pulled energy stocks lower. APC is several points away from our proposed entry points. I am dropping it from the watch list to make room for something we could actually get triggered on.

Our trade did not open. APC is not close to either proposed entry point.

Removed from the watch list.

Originally listed on the Watch List: 11/12/11


Activition/Blizzard, Inc. - ATVI - close: 11.88

Comments:
12/17 update: It was an ugly week for video game stocks. Both ATVI and ERTS posted losses. ATVI is now testing support near its 200-dma. If we see shares close under $11.60 then we'll drop ATVI as a candidate. I'm going to give this stock another two or three weeks. If it doesn't see improvement then we're dropping it from the watch list. I don't see any other changes from my prior comments.

I am still suggesting readers wait for a much bigger move higher. We're listing a trigger to wait for ATVI to close over $13.00 and then initiate call positions the next morning with a stop at $11.90. Our long-term target is $15.75.

Wait for a close over $13.00

BUY the 2013 Jan $15 call (ATVI1319A15)

Originally listed on the Watch List: 11/19/11


Devon Energy - DVN - close: 60.45

Comments:
12/17 update: DVN lost about -10% for the week thanks to a widespread sell-off in energy stocks. Shares are testing round-number support near $60.00. If DVN doesn't see improvement soon we're going to drop it as a potential LEAPS candidate. Right now the plan is to buy calls if DVN can close over $70.25. More conservative traders may want to wait for DVN to close over its simple 200-dma before considering bullish positions (if you do, adjust your stop loss higher). Our long-term target is $89.

FYI: 2014 calls are also available.

Wait for DVN to close over $70.25, buy calls the next day, stop 62.50

BUY the 2013 Jan $80 call (DVN1319A80)

Originally listed on the Watch List: 12/10/11


Family Dollar Stores Inc. - FDO - close: 57.92

Comments:
12/17 update: FDO managed to eke out a small gain for the week. We're still waiting for a pull back. Currently the newsletter is suggesting investors wait for a dip and buy calls at $54.50. If triggered we'll use a stop loss at $51.25. I am suggesting we keep our position size small. Our long-term target is $69.50.

FYI: An alternative entry point would be a close over resistance at the $60.00 level.

Buy-the-Dip trigger: $54.50, stop loss 51.25

BUY the 2013 Jan $60 call (FDO1319A60)

12/03/11 Adjusted trigger to buy the dip at $54.50 and stop loss to $51.25, they were 53.00 and $49.45.

Originally listed on the Watch List: 11/26/11


McDonald's Corp. - MCD - close: 97.49

Comments:
12/17 update: MCD tagged new all-time highs last week above $98.50. I am starting to wonder if MCD might announce a stock split in the next few months. The last time MCD had a split it was a 2-for-1 split back in 1999 with shares around $85.

We still don't want to chase it here. Currently we're waiting for a correction back toward $90. However, I will adjust our entry point trigger from $90.00 to $91.50. We'll move our stop loss up to $87.25. Our long-term target is $108.00.

Buy-the-Dip trigger: $91.50, stop 87.25

BUY the 2013 Jan $100 call (MCD1319A100)

12/17/11 adjusted entry point to $91.50, stop loss to $87.25
11/26/11 adjusted stop loss to $86.45

Originally listed on the Watch List: 11/05/11


3M Co. - MMM - close: 78.87

Comments:
12/17 update: MMM is hovering under the $80 level and near its 50 and 100-dma. I don't see any changes from my prior comments.

I am suggesting we buy calls after MMM closes above $85.00. We'll use a stop loss at $78.90. Our long-term target is $97.00.

We are listing the 2013 calls. MMM does have 2014s available.

Wait for Close over $85.00, then buy calls, stop: 78.90

BUY the 2013 Jan $95 call (MMM1319A95)

Originally listed on the Watch List: 12/03/11


Motorola Solutions, Inc. - MSI - close: 46.16

Comments:
12/17 update: Profit taking in MSI was relatively minor last week. I don't see any changes from my prior comments.

I am suggesting we wait for MSI to close above $48.25 and then buy calls the next day with a stop loss at $43.75. Our long-term target is $64.50. The Point & Figure chart is bullish with a $58 target.

FYI: 2014 calls are also available.

Wait for MSI to close over $48.25, buy calls the next day, stop 43.75

BUY the 2013 Jan $55 call (MSI1319A55)

Originally listed on the Watch List: 12/10/11


NVIDIA Corp. - NVDA - close: 13.51

Comments:
12/17 update: We are removing NVDA from the watch list. The stock has really underperformed the last couple of weeks. The stock looks poised to breakdown under short-term support near $13.50 soon.

We are removing NVDA from the watch list.

12/17/11 removed from the watch list
12/03/11 Adjusted entry strategy to wait for close over $16.25.

Originally listed on the Watch List: 10/29/11


ON Semiconductor Corp. - ONNN - close: 7.39

Comments:
12/17 update: Semiconductor stocks were big losers last week thanks in part to INTC's earnings warning on Monday. ONNN has retreated back to the bottom of its trading range. More aggressive traders may want to open bullish positions now with a stop loss under Wednesday's low near $6.92. The newsletter will wait for a breakout.

I am suggesting we wait for ONNN to close over $8.50 and then buy calls the next day with a stop loss at $7.70. More conservative traders may want to wait for ONNN to close over its simple 200-dma instead. Our long-term target is $11.45. I would keep our position size small.

Wait for ONNN to close over $8.50, buy calls the next day, stop 7.70

BUY the 2013 Jan $10 call (ONNN1319A10)

(small positions)

Originally listed on the Watch List: 12/10/11


Pepsico, Inc. - PEP - close: 64.71

Comments:
12/17 update: PEP spent the week hovering in the $64-65 zone. Shares look ready to breakout past resistance if the market will cooperate.

I am suggesting we wait for PEP to close over $66.25 and then launch positions the next day with a stop loss at $62.75. Our target is $71.75. I would keep our position size small to limit our risk. FYI: The Point & Figure chart for PEP is bullish with an $81 target.

Wait for PEP to close over $66.25, buy calls the next day, stop 62.75

BUY the 2013 Jan $70 call (PEP1319A70)

(small positions)

Originally listed on the Watch List: 12/10/11


Sherwin-Williams Co. - SHW - close: 84.64

Comments:
12/17 update: SHW flirted with a breakdown under technical support at its rising 50-dma this past week. We are still waiting for a breakout to new highs.

I am suggesting investors wait for SHW to close over $88.00 and then buy calls the next session with a stop loss at $82.45. If triggered our long-term target is $99.50. FYI: The Point & Figure chart for SHW is bullish with a $92 target.

Wait for SHW to close over $88.00, then buy calls, stop: 82.45

BUY the 2013 Jan $100 call (SHW1319A100)

Originally listed on the Watch List: 12/03/11


TJX Cos. Inc. - TJX - close: 62.14

Comments:
12/17 update: TJX is still consolidating near its highs. The stock has spent more than two weeks now churning sideways in the $62-64 zone. I don't want to chase it here. It's unlikely that TJX will hit our entry point any time soon. Thus we're going to remove it from the watch list.

We are removing TJX from the watch list.

12/17/11 removed from the watch list.
11/12/11 new trigger @ 56.25, new stop 52.40
10/29/11 adjusted trigger to $55.00, stop to $51.75
10/15/11 adjusted entry point to buy the dip at $54.00, stop at $51.45

Originally listed on the Watch List: 09/24/11


Wal-Mart Stores Inc. - WMT - close: 58.27

Comments:
12/17 update: WMT is essentially unchanged for the week. I don't see any changes from my prior comments. Unfortunately it could take weeks before we see WMT provide an appropriate entry point and months for the stock to actually move high enough for us. Trading WMT LEAPS is going to require some patience.

I am temporarily removing WMT from our watch list. Readers can wait for a bounce off support near its exponential 200-dma (currently near $55).

12/17/11 removed from the watch list (moving too slowly).

Originally listed on the Watch List: 11/26/11


Exxon Mobil -XOM - close: 80.16

Comments:
12/17 update: XOM continue to consolidate sideways in the $80-82 zone. The plan is to buy calls after we see XOM close above $82.00.

There is potential resistance at $85 and $87.50 but our long-term target is $94.00.

Wait for XOM to close over $82.00, then buy calls, stop 76.40

BUY the 2013 Jan $90 call (XOM1319A90)

- or -

BUY the 2014 Jan $95 call (XOM1418A95)

Originally listed on the Watch List: 12/03/11